Economic thinking

This academic year marks my 30th as a professor. I feel so excited and lucky to be at the University of Richmond and co-teaching a course with Professor Jim Monks called The Economics of the University. Our students are at the heart of everything we do at UR, and it’s a joy to be with them in the classroom.

In our course, we’re exploring questions university administrations must constantly ask when planning for the future — questions like what to charge for tuition, food, and housing, and why. How do we think about capital projects and maintaining the campus? How much do we spend from the endowment each year? How much do we spend on financial aid? How do we support the student experience? How do we think about philanthropy and working with our loyal and generous donors? And many more. 

Another common question is, “How many students do (and should) we have?” This year, UR received more than 16,000 applications for our first-year class of about 830 undergraduate students. Law and other UR graduate programs are also in high demand. At an event in North Carolina, a Spider alum asked me why the university doesn’t take advantage of this growing interest by increasing the number of undergraduate students we enroll. If we can dramatically increase scale, why wouldn’t we? After all, no business would let such an opportunity pass. 

The core of economic thinking is maximizing something (or how to best allocate scarce resources) subject to constraints. For-profit companies, of course, focus on maximizing profits and shareholder value, subject to their limited resources and other constraints, including those from customers, employees, and regulators.

At UR, we aren’t about maximizing profit — we are about maximizing opportunities for learning and growth. Our objective is to advance our mission by creating remarkable scholarly and creative work and preparing students to lead fulfilling, flourishing lives. Maintaining small classes, fostering close mentoring relationships, and cultivating a tight-knit, intellectually vibrant, and relentlessly welcoming Spider community advances our mission and adds great value for our students. Since we intend to maximize those things, our current size is a fundamental strength.

But we also face constraints. And we have many categories of constituents, including students, staff, faculty, alumni, parents, and regulators who have valuable perspectives and relevant interests. They all make good suggestions for improving the University.  Our maximization problem is, therefore, very complicated, but it is fascinating! So we can — and must — use economic thinking. While we are not profit-driven, we are obviously responsible for stewarding the university's resources wisely. After all, every time we decide to spend a dollar on any single thing, we are plainly deciding not to spend it on every other thing. We owe it to all our constituents to strategically spend and invest so UR continues its marvelous upward trajectory and can advance its mission now and in the longer term.

I’m incredibly grateful to be working with Professor Monks and a small group of terrific Spider students this semester to explore the university’s financial responsibilities and the many economic questions that I and other campus leaders think about constantly. I know I will learn a lot from each of our students this year, and I hope they learn a bit from me, too.